Question: Some of my employees recently asked why my company does not offer paid vacation time. I try to be flexible with my employees’ needs for time off, but we are a small business and I just can’t afford to give paid vacation. Am I out of sync with the rest of the business world?


Answer: The United States has been nicknamed the “no-vacation nation” because it comes in last place when comparing the number of vacation days provided to workers in the top 21 countries in the Organization for Economic Cooperation and Development, an international economic organization of 34 countries.   Many other countries are legally mandated to provide paid vacation to employees. In addition, many cultures place more emphasis on paid vacation time. Currently, California law does not require employers to provide paid vacation, and many do not.
A 2014 survey of over 2,000 employers in the United States conducted by the Society for Human Resource Management (SHRM) shows that U.S. employers recognize the importance of rest and relaxation for employees, together with flexible scheduling and greater autonomy in managing time away from the office. The survey participants were mostly private employers with 500 or fewer employees from all business sectors, including manufacturing (19%); professional, scientific, and technical services (19%); and healthcare and social assistance (17%).
The SHRM study reveals that 52% of the companies surveyed offer paid time off (PTO) plans to their full-time employees. PTO plans combine vacation, sick, and personal paid time off in one benefit rather than having a separate allocation for each type of paid time off. Of companies participating in the survey, 41% offer paid vacation, 34% offer paid sick leave, and 22% offer paid personal leave to their full-time employees.
The vast majority of the companies participating in the survey provide employees with a set number of PTO (94%), paid vacation (98%), paid sick leave (88%) and paid personal (95%) days per year. Most employers offer paid vacation based on the employee’s length of service at the company. However, in the majority of companies, an employee’s length of service has no impact on paid sick leave and personal leave plans. The average days per year offered in PTO plans range from 14 days for employees with less than a year of service to 26 days for employees with 20 or more years of service.
U.S. employers are also providing more flexibility to fathers. Research has shown that fathers have become more active in caring for infants, and the SHRM study confirms this trend: roughly one in five organizations (18%) offer paid maternity leave, and now nearly as many (16%) provide paid paternity leave for their workers.
If you decide to offer paid vacation to your employees, here are some basic rules to remember in California. It is best to have a written policy defining how much vacation employees get, who is eligible for vacation, how it accrues, and what type of notice an employee needs to provide before taking vacation. Paid vacation and PTO are considered wages as they accrue, so when an employee leaves your company, you must pay all accrued but unused PTO and vacation. Finally, you cannot adopt a “use it or lose it” vacation policy, but you can place a reasonable cap on the maximum vacation accrual.
Providing paid vacation time can improve employee morale and productivity and is worth considering, even for a small business.